Tag Archives: emerging markets

India has a new central bank head. North Korea detonated a nuclear device. The Turkish government may be eyeing the central bank for the next purge. Mexican Finance Minister Videgaray resigned. Incoming Mexican Finance Minister Meade announced new spending cuts.  In the EM equity space as measured by MSCI, Colombia (+4.1%), Hong Kong (+3.9%), and China (+3.6%) have outperformed this week, while Thailand (-4.4%), Qatar...

EM ended last week on a soft note.  Fed tightening expectations were buffeted first by hawkish Dudley comments and then by the more balanced FOMC minutes.   On net, the markets adjusted the odds for tightening by year-end a little higher from the previous week, and stand at the highest odds since the Brexit vote.  Yet despite the strong jobs data in June and July, odds of a move on September 21 or November 2 are...

China unveiled a second equity link that will allow foreign investors to buy local stocks with fewer restrictions. Saudi Arabia will allow qualified foreign investors to subscribe to local IPOs starting this January. South Africa’s two main opposition parties agreed to informally band together in local governments. The Brazilian central bank decreased the daily intervention amount to 10,000 reverse swap contracts...

The vulnerability of global food production to extremes of weather is a profound reality that few grasp. Given the current abundance of food globally, confidence in permanent food surpluses and low grain prices is high. Few worry that the present abundance of food could be temporary. But the global food supply is more fragile than we might think, despite historically low grain/agricultural commodity prices. Both corn...

United States EM FX ended the week on a soft note, despite the weaker than expected US retail sales report. Official concern about strong exchange rates is beginning to emerge. First it was Korea, then on Friday it was Brazil as acting President Temer said his country needs to maintain a balanced exchange rate, neither too weak nor too strong. We expect more pushback to emerge if the current rally is extended....

S&P upgraded Korea a notch to AA with a stable outlook Voters passed the constitutional referendum in Thailand by a wide margin The IMF and Egypt have reached a staff-level agreement on a 3-year $12 bln loan program Argentina’s central bank will begin using a new overnight rate to manage monetary policy Political uncertainty has returned to Brazil In the EM equity space as measured by MSCI, Colombia (+6.3%),...

Summary: Liquidity rather than intrinsic value seems to be driving EM assets. MSCI EM equity index looks constructive technically. The chart pattern suggests scope for around 13% gains from here. Scratch an investor, and you will find two models.  One is a fair value model, perhaps based on free-cash-flow or earnings expectations, or breakup value.  The other is based on liquidity.  We suspect that the latter...

EM ended last week on a firm note, despite the stronger than expected July jobs report.  As we suspected, one strong US data point is not yet enough to derail the dovish Fed outlook.  With the RBA and BOE cutting last week and the RBNZ expected to cut this week, the global liquidity backdrop remains supportive for EM and risk. Looking at individual country risk, we note that investors must remain discerning.  We...

India’s upper house approved the creation of a Good and Services Tax (GST) The Polish government softened its stance on the proposed Swiss franc loan conversion plan Support for South Africa’s ruling African National Congress (ANC) appears to have fallen below 60% for the first time ever Brazil’s Senate impeachment committee recommended putting President Rousseff on trial In the EM equity space as measured by MSCI,...

EM ended last week on a firm note, helped by the weaker than expected US Q2 GDP report as well as the small bounce in oil.  With the RBA and BOE expected to ease this week, the global liquidity backdrop remains favorable for EM and “risk.”  US jobs report Friday will be very important for EM going forward. We get our first glimpse of the Chinese economy for July with the PMI readings this week.  EM CPI data this...